This undergraduate survey course, taught by a retired Federal Reserve economist, will introduce you to the challenges of central banking during the extended period from the onset of the 2008 Financial Crisis, to the “Great Recessions” that followed, as central bank policies shifted to boosting and speeding the economic recoveries. That was followed by the 2020 COVID Pandemic and Recession, then central bank actions helping the economic recoveries from COVID, the global COVID Inflation, and more recently, the central bank policies designed to slow inflation. And, now, recent banking system concerns over rescues and failures and potential financial panics may impact central bank efforts to slow inflation, or to at least temporarily change the focus of monetary policy to supporting financial stability.

The primary emphasis of the course will be on the importance of monetary policy to the health of the overall economy. Central banks are playing a critical role in 2023 in supporting their financial systems and economies, while trying to meet their typical goals of economic growth and full employment, and low and stable inflation (around 2 percent a year). We will examine both conventional (typically interest rates) and unconventional monetary policy tools (like bond purchase or sales to influence interest rates) used by central banks and how their use developed following the financial crisis.

We will discuss the roles of central bank independence, decision making, and transparency in the process of making monetary policy. We will focus on the key roles of the Federal Reserve System (FED) and the European Central Bank (ECB) in their respective economies, with special emphasis on their actions during and following the 2007-2009 financial crisis, the serious recession(s) that followed, the long and moderate economic recovery, how central banks responded to the COVID Pandemic’s dramatic impacts on their economy and inflation, and in the past weeks, how concerns about the safety and soundness of the banking and financial system may influence monetary policy decisions by the ECB & the FED between now and May.

Looking forward, we will examine how central banks had planned to normalize monetary policy as their economies expand and inflation approaches (or was expected to approach) their 2 percent inflation goals, and finally, what actions central banks are taking in 2023 to boost their respective economies to counteract the global banking concerns.

We will examine the Fed and ECB’s policy decisions over the past year and potential policy alternatives in the year ahead in the context of current economic conditions, labor market developments, movements in inflation, and explore the path towards monetary policy normalization. Shocks (like the Brexit vote, actual Brexit, trade wars, COVID, financial institution failures and potential bank run and contagion effects) create significant challenges for monetary policy and bank regulators. We will discuss the potential impacts of shocks on their respective economies and perhaps the global economy, and how the shocks may impact central bank decisions.

Students are required to notify the instructor in the event you must miss a partial or full (4 or 5-hour class session).  

--> Missing most of or a full class session requires completion of an additional assignment, usually an additional short paper on a topic related to your class project or a major topic covered during the missed session (500 words).

FINAL EXAM: (50 % of course grade):
Students will be required to complete a comprehensive in class final examination at the end of the May 17, class session. It will be comprehensive and cover materials from the lectures, readings, videos, other course content and in-class discussions.

CLASS PROJECT (30 % of course grade):
A short PRESENTATION (PowerPoint) on May 15, from a small groups or teams of students to the class with their recommendations for a monetary policy decision, either for the FED or the ECB. You will have access to all the public information & data from the FED or the ECB discussed in class to support your policy decisions. Remember also, as happens at actual monetary policy meetings, every individual (or in our case team) may not support the same monetary policy! THAT MAKES THINGS INTERESTING and requires that you present a strong case with supporting analysis from official sources to convince the class!

CLASS PARTICIPATION: (20 % of course grade)
The remaining 20% of the course grade will be class participation. Participation in the COURSE will be monitored by participation in class discussions, asking and answering questions, and making observations. Your questions and comments are important! I will track participation during the course.

“Typical” Course GRADING SCALE: Grade Points and Percentage Descriptions
GRADE 1 = 90% + Excellent, or outstanding performance.
GRADE 2 = 80 – 89% Very good, good and solid performance.
GRADE 3 = 70 – 79% Satisfactory, indicates a satisfactory performance and
knowledge of the subject matter.
GRADE 4 = 60 – 69% Marginal performance. Performance meets the minimum criteria.
GRADE 5 = Below 60% Unsatisfactory performance